Car Group (ASX:CAR): Successful in Australia, but now going for global growth

For most of the listed life of Car Group (ASX:CAR), it has been known after carsales.com.au; its original car classifieds site in Australia. It was founded in 1997 and now has over 200,000 new and used cars for sale, but the company has even bigger ambitions. But the company, a member of the ASX 50 cohort and one that is worth over A$11bn, has bigger ambitions.

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Car Group (ASX:CAR) is going global

These days, CarGroup consistently generates more than half its revenue outside Australia And even in Australia, it has diversified away from cars towards boats, bikes, machinery, caravans and trucks. It generates 27% of revenue from North America, 18% from the LATAM region and 12% from Asia where it owns Trader Interactive, webmotors and Encar respectively.

Source: Company

We can understand investors at home in Australia not recognising any of these global brands. But many of these are the number one classified sites in their markets too. Encar has 6.9x market leadership of its next largest competitor whilst Webmotors and Trader Interactive have 3x.

Moreover, these sites provide other services too including pricing data, ownership information and even finance options. The prospect of using AI is being explored including prequalifying dealer leads, fraud lead blocking and even assisted customer support. The company is also looking to eventually offer payment services through its app and website, potentially eliminating the dealer from the equating altogether.

But the way Car Group makes its money right now is through ‘direct media’ – in other words, advertising. The average private add fee per vehicle is just over A$160 in Australia. With the average car price $35,000, it represents a take rate of 0.5%.

Car Group benefits from a ‘network effect’ where it gets more and more beneficial for its users as it attracts more and more of them. This is similar to Rea Group (ASX:REA) which are real estate classified sites.

Good results, but will there be further growth?

At last years’ AGM, Car Group purported to generate 1,158% Total Shareholder Return (i.e. dividends and share price appreciation) since September 2009, over 4x ahead of the 271% made by the ASX 200.

The company made $1.14bn in revenue, $641m EBITDA and a $377m profit (all up 10% in $A terms). It boasted 2.3m total vehicles online worldwide, 19bn page views, 49m unique viewers and 49k subscribed deals. In 5 years, its revenue and EBITDA have grown by 14% CAGR while its adjusted profit has grown by 25% CAGR.

One concern investors would have had is that 18-year veteran in the CEO’s seat Cameron McIntyre retired, being replaced by his CFO William Elliot. During his tenure, the company grew by 5 times and became truly a global company. It is always a nervous period when a CEO leaves after a long period of time and shares have fallen 15% since this announcement. But perhaps investors are over-reacting. You could also argue investors are worried about the prospect of rate hikes which will inevitably flow through to car financing.

For FY26, Car Group has guided to high single-digit percentage revenue growth in Australia, but double digit revenue growth in other regions, in constant currency terms. On a group-basis, it expects 12-14% revenue growth as well as 10-13% EBITDA growth and 9-13% profit growth. It expects an effective 20-21% tax rate and 15-17% growth in depreciation in line with capex growth in recent periods.

Analysts covering Car Group call for $1.29bn revenue and $718.8m EBITDA for FY25 which would be in line with guidance. Then in FY27, $1.4bn revenue, $811.5m EBITDA, followed by $1.6bn revenue and $912.3m EBITDA.

Their mean target price is $39.78, derived from 15 estimates ranging between $31.50 and $46.50 per share. However, these estimates place the company at 27.7x P/E and 2.3x PEG. You might say Car Group is overvalued on this basis, although it was over 35x P/E the last time we wrote about the company a year ago.

The challenge

As the leader in its market, Car Group won’t be impacted by the competition in the immediate term (unless competition catches up, although companies like Car can just buy competitors when they begin to show potential to be a threat).

Car Group purports to have a TAM of A$15.4bn, $8.4bn of which will be in North America. There are various splits between dealers, media and specific automobiles. But what will impact it is the car market more generally.

Remember during the pandemic when used car sales increased for the first time ever? Those were the days. These days, they are back in decline but are ahead of where they were pre-pandemic.

It is arguable that during tough economic times, consumers will turn to used cars rather than new ones. And in 2024, used car sales grew 12.1% to 2.3m. New car sales were 1.2m, up 1.7%, in that period in case you were wondering. In 2025, used car listings fell although listings rose.

This is an interesting paradox. If demand is weak, people won’t list in the first place. But it is possible the buyers market could cause people to ‘eyeball’ the site and thus generate revenue. And it also remains to be seen if the rise of EVs will cause people to pay a premium for them, especially as prices of EVs come down.

In our view, we would choose to watch rather than ignore this company. Even though its multiples are high, its entrenched monopoly on the market is compelling and means it should do well unless its market experiences a particularly sharp slowdown.